Podcast: Recurring Revenue Can Triple the Value of Your Company, an Interview with Loren Horsager
Recurring revenue is a vital part of many business' success, particularly in today's heavily tech-dependent market. Loren Horsager explains how it can triple your company's value as well as secure a better cash flow.
About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management.
About the Guest
Loren Horsager, Mobile Composer CEO, and founding partner has 20+ years of experience building teams to deliver software solutions, and manage consulting organizations. A visionary who understood the tremendous business potential of mobile technology early on, Loren regularly presents about how companies can develop and execute on mobile strategies. He is a recognized expert in Microsoft and Xamarin development tools.
If you listen, you will learn:
- Loren’s software development background.
- What Mobile Composer does for their clients.
- Why pivoting into software begins with your market.
- Common issues companies have when developing a SaaS product.
- The importance of planning all aspects of software.
- How to measure an increase in value to a business.
- How to build a product that is maintainable and adaptable.
Announcer: 00:00:06 Welcome to Life After Business, the podcast where your host, Ryan Tansom, brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: 00:00:16 Welcome back to the Life After Business podcast, this is episode 83. If someone were to ask you if you wanted to triple the value of your business, would you say yes? Well, on the show today, we talk about significant ways to increase the value of your business, create recurring revenue and to remove yourself from the bottleneck. Today's guests name is Loren Horsager who's the CEO and Co founder of mobile composer. He has been in the software development world for 25 years and what he specializes in is in niche development products for companies and owners who have a customer base and who are able to mind their business and industry for unique opportunities to create a software solution that enables their business to be in the technology game and to deliver additional products and services to people they know, industries that they are already familiar with.
Ryan Tansom: 00:01:06 Because at the end of the day, we know as business owners that we want to create a valuable company that's competitive, that's beating out our competition because we will be more appealing for a future buyer. And when we really boil it down, when we look at how our businesses are valued, most industries in most companies are valued on a multiple of EBITDA or profits. And the software business is valued on a multiple of revenue generally. So if you combine your business with a software-enabled service, you are changing the game about how your company operates, the value bring to your customers, all the different wider range of buyers that could potentially be on the forefront and you're having a blast in the meantime. So I hope you enjoy this episode with Loren. He gives a lot of practical ways that you can actually implement this and start exploring if this is something that is worth pursuing along your journey of growing and exiting your company.
Announcer: 00:01:57 This episode of Life After Business is brought to you by Solidity Financial's growth and exit planning. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. Sell your company on your timeframe to the right buyer at the price you want.
Ryan Tansom: 00:02:20 Loren, how are you doing today?
Loren Horsager: 00:02:21 Great, how are you, Ryan?
Ryan Tansom: 00:02:23 Good. I'm excited to have you on the show because you're a good friend and uh, we'll be able to talk about a lot of the stuff that you and I have been chatting about for years and now for the listeners as right before you dive into your background, who you are, but I have to give a little bit of shout out that as you and I were sitting over beers and talking about what we should be doing with our lives a few years ago, you had really challenged me to get into this whole value building, exit planning journey that I learned a lot from selling our business, but it really pushed me towards actually making a business out of it, which resulted in the podcast. But, so if before we dive into the whole the story, why don't you just give the listeners a little bit of a background of where you came from and how you got to where we are today?
Loren Horsager: 00:03:06 Sure. So I've been a software consultant for 25 years and so I've worked at a lot of large corporations and small businesses, mid-size businesses. The great thing about it was you got to see a lot of different industries and you got to see what worked, what didn't work, who's ahead, who's behind all those kinds of things. So it was a great learning experience for understanding not just technology but business problems and how people were approaching them. Um, so I ultimately, you know, I have an economics degree, so I come at it from a business perspective even though it was implementing technology, which was really fun. So, uh, with that, um, that really led me down this path of, uh, the last 10 years or so, seeing a lot of mobile development happening and it's really interesting how it was really different than, um, previous previously how development happens in a lot of these companies.
Loren Horsager: 00:04:00 Um, there are lots of challenges around who was leading it, a lot of times marketing or sales were leading it, not technology or IT, which was really interesting. Things move really fast but didn't always get to where a good place very quickly. So we just learned a lot about that process which led, uh, led me to develop Mobile Composer about five years ago. And so we actually focused on building a platform to make implementing technology easier. Uh, so we have a platform that has really, there's three main areas. So one is the technology piece of this, which is all the tools and libraries to actually improve development. So both web development and mobile development, so you can kind of plug things together and build a new product quite easily. There's lots of still custom pieces that have to get developed. But one of the things I like to talk about was like security security is one of those things from a developer's perspective, it gets done on every single project and it's just ridiculous because you do it exactly the same way or you should do it the exact same way every time.
Loren Horsager: 00:05:04 So we built those things into a package that we use and then there's really two choices. Do you want to use active director or do you want to use database security so we can implement either of those options, but that's really your choice, right? You should spend 50 percent of every project rebuilding the same stuff. So that's the technical heart of our platform. We also then have all the pieces to manage a product life cycle in there. So everything from how you generate ideas and validate ideas to how do you develop a go to market strategy, how you actually do your design, your user experience, and then all the development project management and maintenance, um, long-term to support that. This includes all the best practices so that you can actually make sure that you're continuing to, you know, we're applying something from one industry to another industry and you say make sure that this is the way you develop these ideas.
Ryan Tansom: 00:05:57 Well what I think is super interesting because you've pivoted a couple of times as you've gotten to the point where you realize that what you had developed there and for the laymen people who are maybe not familiar with some of the technical stuff, it's like, you know, the WordPress came out to make, you know, developing websites easier because every time you build a website there's a lot of the core functionality and a lot of industries have done this over, you know, their growth of their industry as the systematize and standardize certain parts of the deliverables because you know, like you said, you don't have to recreate the wheel. And as you've made this shift and you started to realize how technology has become easier, maybe. Yeah, because the whole point of having you on the show and understanding what the value that you're bringing for these businesses and the values of these businesses start to maybe give the listeners a two cents on what are the conversations happening and where are the... What's the dialogue going on about how you guys fit into your customer?
Loren Horsager: 00:06:54 Well, so that actually leads into why we pivoted. So we actually, we built the platform initially and then we built a product on top of it and what we've learned over the years just we're really good at figuring out how to develop products, how to, how to find the right market, how to identify what the product should look like and how to actually bring that to market. So we've kind of pivoted and pivoted back actually, um, but with a lot more understanding of what the platform needs to do. So the conversations now really revolve around, um, well first of all who we're talking to. So we tend to talk to small- to mid-size company or business owners who are really stuck in a situation that um, they have a business that they've built over years and it's potentially a really good business, but the valuation is not where they want it to be or where they think it is.
Loren Horsager: 00:07:46 And I just think that, you know, this actually leads into the, you and I both read, Built to Sell about the same time when you were kind of figuring out some of these things out and we were figuring some of these things out and I just think it's really, ah, the eight key drivers in there really identified a need in the market to actually approach what you're bringing to market. So it's one thing to create a valuable business. As an example, you, I have a friend that has a manufacturing company worth about $5,000,000 in or has about $5,000,000 in revenue, does about 10 percent profit, so half a million dollars in profit. What's the value of that company? While it turns out it's not very high. The, I think from your estimations, I think the evaluation will be about one to two times the EBITDA. 500 to a million roughly that that business is worth.
Loren Horsager: 00:08:37 Well, he can't sell the business and maintain his lifestyle based on a company that's actually producing a half a million dollars a year. So when we talk about these things, it's really about how do you actually find a market that you can develop recurring revenue for an existing company? And so that's what we come in and look for. And so our method of doing that is to look at SaaS solutions, so software as a service that you can have a subscription service that you're providing to potentially the same customers that they're already working with because you already have trust, you already have a relationship, you already understand some of the needs they have and understand the gaps in those markets so we can actually help develop a niche SaaS solution that actually targets these, their customers and help them build out that solution.
Ryan Tansom: 00:09:24 If you're a normal business owner and you're looking at this, what does it mean to them to their business? Do you have some stories or examples of how people have implemented this?
Loren Horsager: 00:09:33 Sure. So let me tell you about a company that we worked with and this would be in the service realm, right? So they're a service company, they are non-technical and they go out and provide sales training to organizations and they're really good at it. Um, but the challenge is, what is the value that company? Well, it's not great, because without each of those individual people, the company's worth nothing, right? Without their... It's a small team, so without that team, the company's worth nothing.
Ryan Tansom: 00:09:58 Right, because they consult and they just go out and just every single it's project-based, right? So they're going out there getting their client and they're doing some sales implementation and training and then they have to hopefully we get the repeat business, right?
Loren Horsager: 00:10:09 Exactly. So it's completely project-based. So their need is really to generate recurring revenue and to pull them out of the process, right? So what we did for them is basically went through and, and you know, as you think about part of the process, what we did is they identified that they wanted to build recurring revenue and figure out how to actually get, um, you know, provide something that would build recurring revenue. Well we actually sat down and started talking through this and what we really have to come from is from the perspective of the end user that's going to be using this, so the salesperson at that training and we then design a solution around that. And then build the product so there's a mobile app that they can actually provide. So there's an additional fee. Now they go in and sell a project, but they also sell the ongoing, um, the app and all the tools and content that come with that. Now they can be more focused in instead of going out and doing a project, just maintaining and building additional information that's going to go into the app and then the tool now to build the tool and the functionality of the tool for what that provides for those salespeople.
Loren Horsager: 00:11:13 But now they're locked in. They have... it would be very hard next year they want to go with the different sales trainer. That's not really a doable solution because this is now part of their day-to-day process for all the salespeople. So they're locked in plus they're building a recurring revenue stream based on this. So the process for this, you know, is we come alongside them and work with them to actually build this. They have the industry expertise and the business knowledge. We come along with that and provide our technical knowledge and business knowledge of how to implement something like this so they have no technical people in their company, so we provide all the technology piece of it, but now providing a software product to their customers that is providing this recurring revenue.
Ryan Tansom.: 00:11:59 And the value of their businesses goes way up and they removed themselves from the process and everybody's a lot happier.
Loren Horsager: 00:12:05 Exactly, exactly. But that whole process can be a little scary, maybe, if people haven't gone through it. But maybe they do not have the technical resources, but they can come along and actually build something recurring, build something of high value that actually gets them where they want to be with a business, using someone like us to actually provide the technical know-how to do that.
Ryan Tansom: 00:12:27 So then lets you got another example that you can kind of shed some light on and how maybe a different industry has implemented something that you know, they, you know, have expanded their services or been able to become more technology enabled.
Loren Horsager: 00:12:41 This is a little bit different scenario. It's not so much about building recurring revenue, but how software product can actually change how you- growth of your business. So we just completed this product that actually when it went live here a couple weeks ago and it's a medical company that builds custom formulated, um, nutrient products based on specific cases. So what happens is a patient goes to a clinic and they do all their tests and then that data goes to a lab, the lab and the clinic have all the hipaa processes actually pass that data back and forth. But there's no great process for passing that data then to this company to actually formulate the right product. So what we did was build a mobile app that actually allows them to just scan a QR code that came from the lab. It's all the data they need, but that has none of the hippa data. So the cool thing about this, it gives this company basically, they're now connected with all the labs in the country that do this and they're the preferred vendor for this task because they've made it so easy to work with them. So their growth model is to now provide this through all the labs in the country because they have the solution to make that work.
Ryan Tansom: 00:13:57 How is what they use to experience with the custom coding and development different to what is available today, and how does that actually change, their business?
Loren Horsager: 00:14:06 Well, I think it's interesting... A change that's happened in technology is we've gotten faster and faster and faster and so we use some new, you know, there's new agile, you know, different terms and different processes that have increased the speed. There's better technology, better ways to develop things. That's, that's all... That's great. But in some cases it's actually a bad thing because there, there needs to be the strategy piece that works with this and all the processes like I'm a really big believer in the lean methodology like lean startup methodology for creating ideas and creating products because you actually need feedback in these mechanisms. So this is what we saw in just doing mobile development, you know, five, 10 years ago marketing was leading these efforts and they not have the, the, the technical chops to actually manage a project this way. So this is exactly why a lot of companies are scared to do something like this as well because they don't necessarily have the experience doing this, right? So the challenge is, and I see this way too often, is that they work on a product and it might be a really good idea, but it's usually not the idea you started with. It's almost never the idea you started with. So you need to be able to change and manage that. So people have a budget that says I'm going to spend, you know, $300,000 building this app and then when it's done we're going to sell it and we're gonna make money. Well the problem is they're off just a little bit and they can't sell that to anybody. So now they don't have any budget left though to make the changes that can actually make it a really good product. We see that all the time.
Ryan Tansom: 00:15:41 Sorry to interrupt, but let's go back to like all like, you know, maybe we can resonate with some of the listeners here where it was a manufacturing company that went online and they wanted to have an ordering PO system that's integrated online and they spend half a million dollars on it and then no one liked it or like there was a, some sort of other delivery system or something. So there's all these different functions that I've watched people spend tons of money on and didn't have any exposure, took years and tons of headaches and the developers and the technical people never knew what they were trying to get across and then totally flops the first time. And so how does that relate to what you were doing?
Loren Horsager: 00:16:19 I think, I guess back to the point, like how do you actually solve that problem? I think there's two things. One is there's the methodology so you have to use like I'm a big fan of the lean methodology because you actually need to do incremental development and then prove that out. So the validation part of that is really, really important. So how do you get feedback from actual people that are potentially going to pay your money and can you get them to commit to you before you even had something developed by showing them so much value in what you're creating and then they can contribute some to actually providing... you go talk to them and say we want to do this and it's going to help you with this problem. So yeah, but that's not quite my problem. Here's my problem. And they'll help you identify it and help you make it better. [cross-talk]
Ryan Tansom: 00:17:04 Expand on that story. Cause I think you've got a ton of experience on this and I've gone through some of this in my own experience, the right and the wrong way, but maybe elaborate and...
Loren Horsager: 00:17:14 Can I use you as an example?
Ryan Tansom: 00:17:15 Sure.
Loren Horsager: 00:17:17 I mean I think it's the same process and it's not to say that people aren't good or tracking the right effort, right? It's just a process that has to be followed through. So we're working on the app for your business, right? To to manage accounts and manage the growth plans and actually manage day to day business activities to actually grow and build and exit a business, right? So that was a little bit of an unknown. Like sometimes you're dealing with something that really is not out there. And so how do you do this in a way that actually gets us to the solution? Well, we now know that decisions we made a year ago are not valid anymore and we've had to modify and continue to improve and change what we're developing because of the feedback we get and that's how it should go. That should be the process.
Loren Horsager: 00:18:02 So this is why people talk about building a minimum viable product and the, sometimes you need more... like a minimum viable product can be a pretty big thing sometimes. Um, when you're talking business-to-business kind of tools, but it still is important to get to where you're solving this one problem. And now you might come back and change it. You almost certainly will come back and change that and you need to plan and budget for that, that, that, the product is not a static thing that you build once and you're done. You can walk away from. So back to the point of using the right methodology. The second piece is having the right team that's going to not only develop it but maintain it. So this is where we come in that we actually do truly partner with people so and that can mean a lot of things which we can talk about in a little bit, but we actually come alongside and know that we're going to be responsible for maintaining this as we develop it. So we actually want to design and maintaining can be evolving as well. Right? So how do we evolve this product as we go forward? So we actually design things in a way that we want to be able to maintain it and, and, and get paid for that because we're making smart decisions and making sure that we can continue to evolve and improve that product.
Ryan Tansom: 00:19:10 Well, I think, you know, if I can go back to the methodology and then I'll jump in on the team cause so the methodology and what you were explaining it, you know, I think everybody can do this in their business, which you know, that's how the, the copier business got into the managed IT, got into the software because you, and I think, you know, we were almost doing it. A lot of industries, the consultants tell the industry what they should be doing instead of asking the customer and I think so many people were, all the consultants make a ton of money in the industry because they say you need to do this and then you go back and you realize that your customer doesn't even want it. But like in this fashion, I think you've got plenty of other examples, but it's everybody's able to actually do this where they go ask your customers and whether they're in professional services or whether it's accounting, legal, whatever it is, that they've got the ability to ask your customers like how could your experience be better? And what are the different ways that it could be better? And their customers have really good ideas. So there's opportunities to be mined out of that. And I've seen people and some of the listeners might see it on the, the digital marketing that's out there where like, these people get crazy followers, you know? And then they'll ask their customers and their list like, Hey, would you buy this if I develop this? And people go, yeah, do it. So that's a lot because you're getting some seed funding or some buy in knowing that your idea's at least in the right direction. It's kind of like the whole cannonball and bullets theory from a Jim Collins' Good to Great.
Loren Horsager: 00:20:31 This is why I think you made a good point that no consultant can tell you what the right right features are, the right functionality or the right thing. Your customers can tell you. And the great thing about like we do some work with startups, but mostly we're working with existing companies that have products or services that they're offering. So they already have customers and we really want to be working on making sure we're meeting those same customers' needs. So it's really about growing within those customers. That's not always the case, but a lot of times. So the goal is go talk to your customers and get feedback. It's a really fun process. One thing that I hear out of that people are afraid of sharing their ideas because they think someone's going to take them. I think that's completely the wrong approach and there's people I wouldn't share certain ideas with, but for the most part, the best thing to do is to go share your ideas with as many people as possible and they're going to provide feedback and that feedback, you need to be cautious about it because people can derail what you're trying to do as well by taking you down the wrong path, but you need to take the collective of that feedback and then work towards a solution that can actually solve those, those issues that came up as you talked to customers. It's a really fun process and it gets you to a really valuable place very quickly.
Ryan Tansom: 00:21:44 Well yeah because I mean like you're actually, you have immediate feedback on whether you're right or the wrong direction and you're getting feedback from the people that are gonna pay you. So let's go back to the then my, my kind of insight on the the right team and I think you've got some really good examples you can share where. So what I've experienced in projects in my past, whether we were the actual software company coming in and because we were the, the software vendor at that point or we were in turn being a part of the purchaser and being the client buying it where you have the idea and then you've got the technical people and then you've got scope creep and you've got people like that whole process I think everybody can relate to even if it's just an accounting system. Like it's so never works out the right way. So there's so much horrible experiences and fear and how does the right team and how do you combine the technical and the development of that to the strategy and to the vision?
Loren Horsager: 00:22:38 I think that in my mind, what I've always taken the approach is the people... like development is a hard... something that people can conceptualize that there's time that needs to go into development and so they allocate a whole bunch of the project to that and they want to get going on that as soon as possible. I think instead the approach should be, don't... like push development as far off as you possibly can and instead focus on these conversations, the research, the getting feedback, the, the design, getting feedback on design. Because essentially you can get to a point where you have a product on paper that's fully designed, fully being ready to implement that is not developed, but you can actually go sell that that way. Um, I know a lot of people who've started companies that had no product to sell and they went out and sold it like, "Here will you buy this?"
Loren Horsager: 00:23:31 And they'll sign up customers. And then they can go build the product. So if you have that, development flows pretty easily because if you don't get off base because everything's been defined pretty much up front in the process of designing the product. If you don't do that, that's where you get into all sorts of issues because developers go off and develop something that wasn't what was designed because there was nothing designed. So if you tell a developer, hey, I need a page to do this, and they go off and create it, and it's like, well that doesn't meet our brand, that doesn't meet our functionality, that doesn't meet anything. So you now wasted a whole bunch of time on that. And that's really, really common, right? It gets way more complex when you're integrating with other systems. So if you're building something that's going to integrate with an ERP system, you're gonna integrate with some other system.
Loren Horsager: 00:24:15 It just complicates that so much more. So the more you have identified and bought in at all levels from internal to external customers and stuff, and the easier that process will go at the same time, you have to balance that with, you're going to always be learning. So there are times to say this is what we planned. We need to make a change to that and modify how we're going to deliver that. But that needs to be a conscious thing. Too often that's, that's just because something didn't get design that, that happens versus a conscious effort to say we're actually making the decisions to change how we're approaching this because of what we've learned.
Ryan Tansom: 00:24:50 So what, uh, I, you know, because I was giving us some, I was interjecting a little bit. So you had the two things that were really important. Was there a third thing or did I distract you too much?
Loren Horsager: 00:24:50 I think there was just the two.
Ryan Tansom: 00:25:02 So then let's go into maybe some examples. What are some exact examples of something where there was an analog business or a traditional business where there was a manufacturer or I know you've got some transportation things in the works and some other like these business owners or they're saying, OK, what is it, what is an exact example of a problem that they would be able to solve that it could be an opportunity within their own client base?
Loren Horsager: 00:25:25 Yeah. So, uh, another example would be a storage Green Companies that we work with. So basically their solution as they currently that they're large and multiple cities and they actually have products that um, but a lot of different technology products to run their business. The problem is none of them are specific to their industry. And this is where we talked about, talked about niche fast solutions. There's lots of good technology products out there, but they might not be good for you. Right? Um, so the challenges in this industry, can we provide a better solution that number one provides a lot better service and is a lot better at communicating that service to their customers, which is always a struggle in that industry as well as actually getting better data collected so they understand how long is this call gonna to take, what does the situation look like? So there's very specific [unclear] happening in this industry that aren't practical on a standard product that they're building a solution that actually allows them to run their business better and that provides a lot of value in and of itself, but they're actually looking at this as once they get this done, they want to take this to market because it's going to be industry solution for their industry and they know it inside out and they also recognize they know it inside out. They can provide that to other smaller organizations in their industry and so they're competing kind of on their traditional business, but they're, they're, they're providing their leadership and their technologies and other companies through this product.
Ryan Tansom: 00:27:00 So you're saying some guy in a bunch of rubber boots that comes down with this big snake to do my do my sewer draining and has the carbon copy paper can actually have some information to make my experience as a customer a little bit better and they make the company more valuable and then they can go sell that product and service to other industry service providers.
Loren Horsager: 00:27:22 Right. So, so things that were including what are the frustrations of working with someone like that? Well, hen are they going to show up, right? You actually, we have a customer based APP and a delivery person's APP for the service person, so they have their own app. But what if you got updates on your app that are telling you, hey, they're going to be here in 10 minutes and that was a real number, you know, it's not like hey, give us a four hour window and we'll be there.
Ryan Tansom: 00:27:46 Right.
Loren Horsager: 00:27:47 So you can actually see when they're coming. It's like, OK, I need to be here in 10 minutes.
Ryan Tansom: 00:27:52 I'm just. Sorry, I'm sorry to interrupt, but it's like how about even for the guy that. Because my old, my first house that I had, I had to do this a lot actually, and he'd come in, he'd traunch through the house, he'd come and he has no idea that it's downstairs and it's a super small stairwell and that he could potentially go out through the back. So I mean like the whole thing was literally a cluster from start to finish and you hate every minute of it.
Loren Horsager: 00:28:17 Exactly. So now, though, once, once you're a customer, they keep that data. So the next person that comes, even if it's not the same person, he can look at that history and say, Oh yeah, I need to go in the back and here's where the, here's where the pipes are, here's where the is that I need to go where I need to go do this job. So all that can be collected and saved and reused. And it's all provided to him right through the APP. So it's in real time because the, there's not paper documents are printed out that morning or the night before or something. It's here, it is, live in the APP and it gives me everything I need to know as well as it gives me everything I need to know training-wise like certain things you run into situations, and this is something we dove into a lot with our APP, the training aspect, real time just in time training is a really important aspect of a lot of these tools because now I'm out there doing something and I get stuck on something, but one of the things you get stuck on, let's record a little 30 second video and explain how you need to do this in this situation and that person can then go through that process while they're on site and has a very effective delivery or service call that actually makes them look really good and they're able to complete it in one shot.
Ryan Tansom: 00:29:22 Yeah. They're at the service technician enjoys himself because he looks good. He's not bumbling through a bunch of stuff and everybody, yeah, everybody gets a better experience.
Loren Horsager: 00:29:30 One more thing to mention there. Um, another thing I think is very useful is the business model canvas. So this is a process we use as we're trying to identify business models. I always start with the audience because I like to figure out who are you actually touching in what ways because you end up finding things that you will not, um, it's not always obvious until you bring this up with people and say, OK, you're going to provide this or these people, these people need to integrate with this system. One, you want to make it really easy for them to do that, but two, what's the, what are the values that they're getting out of the system that, that actually add something to them. So they want to keep coming back and using it, whether they're paying for it or, or just they needed as part of some of their services free or whatever it is they have to want to use it.
Loren Horsager: 00:30:13 And so if you make everybody along the way want to use it for the right reasons, for what they're doing, now you can also start to identify other financial markets. So what are they willing to spend to do this? And why would they spend that money? And you can find additional opportunities like in this case where we need to find someone else to actually pay for it. I think we have a solution for it and we have a long ways to go on that one, but that it's interesting when you see it. So we had used the business model canvas next, which is, I don't know if you've seen this Ryan, but it's basically a one page document that lays out, I believe there's nine different factors, um, so it's everything from your client relationships, your cost centers, your revenue centers, and there's a good book out on this as well. But, um, you can find a lot of information on the Internet, but it's basically a way of kind of laying out your model for this product and really in one page fully capturing it. And the concept is along with lean startup method, you fill out this one page and go share this with people and go walk through it and you're always editing it, always editing it, and you're refining until you actually get to your business model that can make this work.
Ryan Tansom: 00:31:16 Maybe I'll give you a couple of real concrete examples from people that have been on this show. So, uh, Josh Elizetxe he was a digital marketer, which is a service based business. So Josh gave a specific example and like, it's not as sellable because the business is not worth as much because it's people oriented, it's not as scalable. There's a lot of these risks. So he went out and then through some of the research and stuff like you were talking about, he said, OK, well I needed to develop a marketing audit based system and then I integrated into the, into the client. So he ended up creating this software because he then was allowed to scale and create more value to their customers. But he created more value to his business and then he was able to piece it off and then sell it to other agencies. And I think there was another example that you and I have been looking out there and it was um, the name escapes me, but there was a company that they were in the garage door business or the HVAC business.
Ryan Tansom: 00:32:07 They created their own... They had problems with dispatching and their customers and the communication, all this, and then they create a dispatch marketing or a dispatch software to help with their technicians in the user experience with having the in engage with their service technicians and then they were able to go into the garage door, the, the plumbing and the Hvac, and then they ended up taking that and then selling it to other service providers. So it was a way of, like you said, it started small, but they were able to continue to refine it along the way.
Loren Horsager: 00:32:36 Right. Plus if you can identify upfront one customer, one audience that's really, really going to be going to like love this product. It adds value to them. You can now start to build on that and expand out to other audiences and other ways of using it, but you really have to narrow down one to start with. If you try to approach more than that, you're getting it with a product that doesn't make anybody happy.
Ryan Tansom: 00:32:58 So let's, let's, you know, expand on that and what it relates to the business value and how does that impact, you know, so when we look at like, you know, the investment costs and whether there's, you know, there's risk and whether it succeeds or not and like how, you know when you're talking about the business or the built to sell methodology, where, what is it doing to the businesses and how are they able to, you know, protect their business and increase the return that they get based on what they're doing through this process.
Loren Horsager: 00:33:26 Well, I think a couple things. One is recurring revenue can completely change your valuation, right? So back to the example I gave earlier, you know, $5,000,000 manufacturing company, 10 percent profit, it's worth between 500,000 and a million dollars. Well our goal with them is we're looking at creating a product that if we can get over the next three years to a million dollars in sales for the SaaS product, the valuation, the way of valuing SaaS-based revenue is about - right now it's running about five to six times revenue generally. So if we can add a million dollars of SaaS revenue, this, they go from $5,000,000 to $6,000,000 in sales, but they go from a valuation of between half a million dollars, a million dollars to say five to $7,000,000 in value.
Ryan Tansom: 00:34:12 So let's say I know it's wild when we actually talk about it because like, so for the listeners that might have a traditional business versus a lot of this, the SaaS and the software businesses that are out there, I've had multiple people on the, on this show, and it's, it, it can quickly get overlooked if we don't expand on it. Is that so when you're valuing a company in three to five times EBITDA, the, the, the profit. So that could be again, like on a half a million bucks. I mean, you're looking at, you know, 2,000,000 bucks. But what happens is that's on profit, right? So that's based on profit even though they might be a $5,000,000 revenue business. Totally off the, uh, off the different end of the spectrum is software companies that are valued on revenue not profit, which is so crazy and that I was given this example Loren in front of a group the other day. So Amazon is technically an online retailer, right? So they trade on a multiple of revenue versus all the other traditional retailers that trade on a multiple of profit, which doesn't make it... they're playing different games at that point. They're getting value and completely different, completely different ways.
Loren Horsager: 00:35:21 But this is why every company needs to be a software company going forward. So the one other interesting thing here, um, and you brought this up a few times previously when we've talked is to built to sell. The whole hub spoke a hub and spoke method of management where everything runs through, you know, business owner created this and they're running everything and everything runs through them. Well, when it comes time to sell the value, that business degrades a lot because it's not sustainable necessarily without them there, so the value of building a separate software solution usually that will, um, help in reducing- that ends up being pushed to a different group under different people managing it. And so you've now spread out some of that, that responsibility which a buyer is generally looking for in how they value your company.
Ryan Tansom: 00:36:12 Well, I think there's a really interesting example that, um, if anybody's in the managed it services space, so there was a managed it company years and years ago that was sick of the break-fix. And so they started developing software to help do all the stuff preventatively. Well, they started also working on the standard operating procedures and all that stuff. So they started putting their stuff into a system they, they called it ConnectWise when they essentially their manage it part of the business became the least valuable and they kept it as like a Beta. But then they ended up taking that, that software which has grown like crazy and selling it to every other manage it provider. So it's, it's, I don't know what is out there, Loren, because I know that you and I've read the books like Bold and Abundance and Exponential Organizations and all these books that have, you know, talking about this, that, you know, you have to have technology enabled services these days so like you know, how you're layering in technology and your operations I think is just something scary, especially when someone's looking at, you know, three to seven year runway before they want to get out, you know, how do you measure the increase in value in the investment costs or the cash flow expense over the course? Because I know you've get some interesting ways and how were lining all that up to be able to show the value there.
Loren Horsager: 00:37:24 Yeah. So we're taking a little different approach because um, we want to be fully invested in what we're, what we're building and we want to maintain that long-term. So we're actually working with organizations to actually take an equity stake in return for some of our efforts so that we're fully committed into long-term, into developing this all the way to the point where what's really been fun for me the last six months has been we've been getting involved in a lot of early cases before we're even investing in this are starting development for something. We're out talking to investors, not that we're looking for investors for these problems, but where we want them to buy this in three to five years and so we're actually letting them help their. They're giving us guidance on how they want to structure things so that we can actually potentially, and there's no commitment right now, but they're. They can potentially, we can potentially have a buyer lined up three or five years out that as you know, we hit these targets. Here's the expectation of how are we going to do this, here's what the value is going to be and here's the exit plan. So not only is it helping define the value of building the software piece of it, that's really helping define the value and a plan to actually get to an exit for an owner overall.
Ryan Tansom: 00:38:38 It's like when you're thinking about the investment that you're. Because you know, the reoccurring revenue and all this stuff that's in the built to sell, all the different eight key drivers are all intertwined and it's about building a sustainable machine that runs without you, that is easily transferable. And the best way to do that is through technology. And I think there's just so much fear around how are we taking our business in the traditional sense and systematizing and not just creating, you know, Word docs with, you know, to do's and bullet points. So, actually taking the processes and automating them and then, you know, how much does that cost? So hypothetically, let's go back to that manufacturer. So let's say you've got 500 and EBITDA and they invest, you know, call it a hundred grand a year or something for the next three years or they've got, you know, some other partnership that return should be significant because let's say they've got a half a million bucks and they should, they should get another 3,000,000 to four or $5,000,000 out of it when they eventually exit. So there's a direct return based on what they're, what they're putting into the business.
Loren Horsager: 00:39:39 Yeah. And it's a big multiple of the return.
Ryan Tansom: 00:39:42 So what are the, you know, when you think about like what the business business owners these days, because I think it's a big black box and it's very mysterious on technology and apps and development because it's so foreign based on the, the customer service relationships and service delivery that a lot of companies have. How are you, what you're describing, how was that different than an Erp system? Then marketing budgets then see around budgets, then all that other stuff. So you can, you can, you know, spread it into OK, so you've got all this other technology spend that happens no matter what, but, and how does that differ from what you're explaining?
Loren Horsager: 00:40:17 Well, I think any of those are our tools to run your business, but we're talking about is value creation through building new products, ideas that you actually selling in the market. So this is not a support solution. This is, is, is a solution you're going to take to market to add value to your customers. So that's the big difference. And so the, the scary part where I realized, you know, everybody manages their Erp system, all these other systems and it can become a very scary process. Its always a bad word in my, in my world. So we try to avoid it as much as possible. This is where I think the approach is, whoever you're partnering with to do this, like making sure that they're on board to not only help create something but looking at this long-term about how you're going to support that and making sure that support is built in upfront.
Loren Horsager: 00:41:07 Because, um, I've seen cases where you say, Hey, let's let's go build this and we spent our half million dollars developing a product and now we'll do support, but we design this poorly so the support cost goes way, way, way up, and you just can't maintain that without getting to a critical number of customers using that product and paying for that product. So all these things go hand in hand and if, if you're not truly on the same team trying to make the right financial decisions, business decisions, market decisions, and technology decisions, it's, you can't really get there. So the difference is if you're implementing an Erp system, you have a team, maybe you bring in some outside consultants, whatever, and you do that. There's challenges with that, but it's all to support your business. It's a much different. It's a cost center still, right? Right. So yes, you need it to, to continue operating your business, but it's still a cost center that. And there's a different mentality around that. The same people that operate that process are not who should be developing your products. It's a different mindset.
Ryan Tansom: 00:42:10 You're creating a value creation center, which is the value creation for the customers and for your, for your eventual value of the business. So you know, when you think about some, I know some of your listeners are familiar with like the traction approach and if you get this visionary, you got the different roles of the integrator and the different management levels. What are the, who is crucial for part of the team and like how does the visionary and the owner integrate with this and how do you even take a first step into taking in ideas? Because I think most of the business owners have all these ideas which is why they're an entrepreneur to begin with. So what is the crucial mindset and people that you need on board in order to even start down this path?
Loren Horsager: 00:42:50 Um, that's a good question. I'm not sure how to answer that question. So let, let me say this. So our general process is we'll come in and do kind of a kick-off meeting where it's really about understanding some of those ideas and getting those ideas on the table and then start to again go back to the audiences and start to manage what are the, what are these functionality or features gets assigned on who's going to be using what audiences, right? And that helps us start to determine where we can kind of focus things that add value. So where are the value points, what are the things that have to happen regardless if we want to provide this feature to this user and it adds a lot of value to them, but these things are requirements we have to add to these other audiences. So we start to kind of make a matrix of of those features so that we can actually...
Loren Horsager: 00:43:40 So everybody's involved initially in kind of throwing out ideas and audiences and it because they see you ultimately want the entire company represented. Everybody that's selling to these customers, people that are servicing, people that are providing products or services. So all the way through you really want feedback because they all have a little bit different view of that customer and what that customer needs and how you could add value to that customer. But once you do that, as you start to look now at the bigger picture of everybody involved in that and all the features and all the things you could combine to actually provide a real valuable product, it starts to become pretty obvious in almost every session I've ever done like a half hour in. We're like OK, this seems to be the hot area that we need to focus on. Where, where there's something real that this organization something to offer and the customer has a big need there.
Ryan Tansom: 00:44:35 Well what I find is really interesting is like a lot of entrepreneurs get really bored because they built something up that are sustained. But I mean we'd like to solve problems. Right? And this is the definition of solving problems within the own customer base than your own industry that you already know that well. So I mean if you build a sustainable business that is there, you should be able to have the free time to go talk to your customers and really know what the problems are like, hey this prescription isn't filled in time and these are all the problems. This is all the disconnect of all these different people. Like how do we solve that problem? Or the service is not integrate. I mean like just think about the simple stuff like the smart home, like all these different things that are now colliding together. Someone's, you're, you're, you're competing with people that you never used to because the technology is enabling certain- I mean Amazon, they're grocery stores now. I mean, so the technology is running through this, but I think the business owners should be able to get out there and explore this. And I think what's interesting about your approach in the minimal viable product and that whole business strategy first is there's not as much risk. You're not writing a 500,000 check to develop a bunch of code that might not be viable. You're the, you're on the forefront being able to help understand what is actually the problem that we're trying to solve,
Loren Horsager: 00:45:51 Right. Well that, so my whole view of this, like if I go talk to an investor and say I want to build a SaaS product, you know, if I can identify 100,000,000 dollars in potential market in the next three to five years, they're going to laugh at me. But I think there's a huge, huge potential for existing businesses to develop niche SaaS solutions that, you know, what, if I can in this manufacturing example again, if we can get to $1,000,000 in recurring revenue, that has a huge, huge impact on that business owner and that business and those customers. So it, we can develop things at a smaller scale. So from my perspective, my goal is how do we actually minimize the risk, maximize value, and maximize the likelihood that this is successful? So I don't need a massive upside, but we need to be consistent in making sure that there is a market and that we validated our ideas.
Loren Horsager: 00:46:42 Um, my, my little secret, I'll let you out. So if anybody's listening to this, this is actually we're working with what we started off with. Like I said, we have this meeting and kind of go through a, a, an idea, um, assessment and concept assessment and then business owners and from what I've experienced, they really liked to go out and talk to their customers, especially if they're talking about something new. So you're right. If they're bored and want to think about new things, what I do is we kind of set up a plan and we'll do a weekly call after that for a few weeks to test some of the ideas and questions that came out of that. So we have the research from customers to say, yeah, I'd pay for that, or yes, I need that, or no, here's how this works in our case. So it, when you get them excited about doing that and business owners love to go out and actually have those conversations with customers just feeds back into our, our evaluation process of a product and a business model.
Ryan Tansom: 00:47:35 And let's, let's talk about the importance of this and becoming technology enabled as the next five to 10 years happen because you in our rallying back and forth on a previous phone call about there's 4,000,000 baby boomers that have businesses that are going to be going to market because it's like, again, if all the people on your block decided to sell their house, if you're a buyer, you only have to buy the best ones. So explain how this integrates with that whole going back to your economics degree. Right? So explain a little bit about your mission behind that.
Loren Horsager: 00:48:11 Well, yeah. My goal is that these businesses get sold for what they're worth because people put a lot of time and money into developing something, but in most cases, a lot of cases it's not worth what they think. So I think the first thing is to understand what your business is worth because if you don't, if you don't know that you're really walking blind. And I think a lot of people that started companies started because they knew this and they wanted to do work for themselves but really had no idea about the end game for them. And I think that's changed some today. You were right. We were talking about this before and I think that has changed some today, but there's so many people that, yeah, I've run this. I started this company, ran it for 30 years and what's going to happen in the next five years when you want to retire?
Loren Horsager: 00:48:53 I don't know. I don't know. The kids don't want to take it over. I don't know what's going to happen. That's a big problem. So I think it's one thing like even if you have a company that might be worth something today and you could sell it today, it's one thing that you need the valuation there, but you also need to be a player in the market to actually make that work. Because if I'm a buyer and I have 10 companies to do the same thing and I get to pick between them, I'm going to pick the best one like you said. Right? So if, if you're not in this market to actually make sure this runs without you, make sure that you, you are, are, are scaling up. Make, make sure that you're, you're, you're based on recurring revenue. So the business continues to exist. If you're not thinking about those things now and you want to sell in three to five years, you're not going to be ready compared to the other businesses in your industry.
Ryan Tansom: 00:49:44 Because you're not going to be as competitive. Like if I'm a buyer and if I'm going to write a check for $2,000,000, I might finance eighty percent of it over 10 years and no, am I going to want to go buy a service, whether it's Hvac and the garage doors servicing plumbing or you know, a legal firm or a CPA firm or any of these firms. When you know I'm not gonna pay more than two to four times because it's risky. Is it risky, are the customers going to leave? Are there other like, I mean there's, there's a guy that's creating an automated payroll. Just thing got automated payroll and accounting and all this stuff. What is the sustainability of that firm? And even like the garage doors, all that stuff. And I'm going to go in and buy a affirm what is it? What am I going to be able to take and then scale? So is going to be archaic and like you said, if there's going to be 10 of these on the market, which one are you going to want and why?
Loren Horsager: 00:50:33 Right. And so that really gets in like you need to think like an investor is going to think five years from now, so why would they buy your business and who are your competitors for that they would be looking at to buy instead and why and how can you stand out from there? So it really comes down to the built to sell 8 key drivers. Those are really, really good place to start from I think. But but how do you build recurring revenue? How do you get yourself out of the business? And ultimately even if you're not selling, those are good things to do anyway because it gives you more flexibility. It gives you more opportunity. Lets you focus on more interesting things. If you're bored doing, you know you built this company, now you just have to manage it. But there's a lot of people in that case, that situation like, hey, let's go work on something else with or next idea, whether it's software or something else, it just gives you a lot more flexibility.
Ryan Tansom: 00:51:21 You're leveraging your industry experience, too. It's not like you're going from, you know, Hvac to managed IT services or something. You know what I mean? Like you're, you're leveraging and deepening your industry knowledge and your customer base and for some kind of benchmarks for the, for the listeners, how long is this because I think everybody's been through this. Again, I'm going back to the horrible nightmares of software implementations from idea to the whole process to hey, you know, I hopefully have some revenue coming into this and I can see, you know, see the value because there's going to be that period of time before they actually capitalize on it in a sale or a transition. What is the, is it, you know, one year or five years that they should expect, you know, so that way if you're, you know, if they're going to go to go to market and sell in three years, is this something that they want to tackle or is it something that they should do, you know, focus their time and effort and some other places?
Loren Horsager: 00:52:10 It varies a lot based on how big the project is and what the value is. I think in a lot of cases that we look at, our goal is to go through the validation process and the idea and concept piece of this. Over the course of the first three months, we spend a lot of time on that and we think that's really, really important to mitigate our risk and our, our clients risk. And then generally, you know, it's probably another three to six months to develop. Our goal is really to get hopefully where you can start to get into some, some customers even if they're not fully paying for it, but at least you start to get users on board in another three months or so. Ultimately, in most of the cases of what we're developing, it's another six months or so before you're fully developed and so then the question is how long does it take to get into the market?
Loren Horsager: 00:53:01 Now, that varies a lot because what we really try to do, and the reason this isn't just randomly coming up with a product, right? We're trying to leverage your existing customers to add more value to them and you already have that relationship. So it really, really matters what we're selling and how connected that is to that same group of customers and how much you can leverage your existing relationships. So potentially that can you know hopefully you're starting to see revenue three months after that. I think realistically it's another year out before you're really probably covering all the costs associated with this, but then after that, at two years you're really in a place where it should be self-sustainable and growing.
Ryan Tansom: 00:53:42 Is there. Is there a. You know when you're. When you're looking because you're exposed to all these businesses and all these industries like I am. Is there certain industries that you see that are just right for low hanging fruit to like solve specific problems or there's certain industries that are kind of behind, so people that are willing to make the effort that you're going to be able to probably see them come out the other side in a pretty good spot.
Loren Horsager: 00:54:05 I think there's. So I've been asked that question a lot and I don't really see there being a specific industries that we target. I think they're, it's almost every industry I've been involved in has had some opportunity, some way to think differently about it and create a different approach that creates a huge amount of opportunity. So the accepted here's the one, I cannot figure out a solution for is real estate agents and now there's tons and tons of tools out there. It's one of those markets where it's already pretty saturated, but uh, there's probably an opportunity we just haven't discussed. We have a never dove into it, but that's the one example that always scares me. Like I don't, I don't know if I'd want to work on that one because it's such a saturated market, but in most of these cases there is a niche opportunity, so even though it might be a saturated market, there's a niche opportunity to go after a very, very specific part of that industry.
Loren Horsager: 00:54:59 So we're, we're in conversations with a few different transportation groups and we're working on some logistics stuff. I think it's really interesting that one of these is a very, very, very niche. They support trucking companies on the road so they'll go out and serve like if they have a flat tire engine problem or whatever, they'll go out and service them. Well, it's an interesting market and it's a very, very special. I think there's lots of logistic products out there to do this, but none of them fully meet their needs because of the requirements of that specific type of business. It's not a trucking company. It's a little bit different, but most of those companies are using trucking software because it's similar to what they're doing. So if you can create a niche that actually just... It might be 10 percent different in order to actually solve exactly what's needed for that industry. You end up with something really, really valuable and that applies to almost every industry. There's some kind of opportunity to do that.
Ryan Tansom: 00:55:56 Mining for inefficiencies or whether it's like, I think you were working on that- I know you've got a bunch of confidentiality and stuff, but it like, you know, whether it's labeling and the process of, you know, handling of certain confidential goods and you know, the scanning and then transferring of information back and forth between people or... I think there's just so much opportunity to dive into this because I think it's the stories that people are going to start juicing a creative minds is there's that stuff all over the place. So I think it's just really just looking at and looking for problems.
Loren Horsager: 00:56:28 Exactly. Looking for problems, is it. So usually how he's we, we've had conversations where we'll just sit down with someone because they want to try to identify something and they don't have. The ideas will actually sit down and work with them and go through a a session to try to pull out what some of those opportunities are. It takes a lot of research behind it, but that's kind of the first step is starting to find those ideas of where do people have challenges, what are the challenges in a lot of times just go, go talk to people, go talk to your customers, find out what their challenges are if you don't know. And in the process of doing that first you're going to build probably much better customer relations, but you're also going to have a lot of fun and learn a lot about your market and your industry and your customers in what actually where their, where their struggles are and how you might be able to fix it.
Ryan Tansom: 00:57:12 Yeah. As we're wrapping up here that you said you've talked to a lot of investors, you know, because you're working in the middle between you got, you know, bringing someone in, creating the, helping them create the value and solving the problems to potentially get them to an exit. What are the investors looking for? So when you're at, when they're saying like, here's what we want, here's how to guide them, like here's how, you know, what are some of the trends that are common statements that these investors are looking for for potential ripe acquisitions that they want?
Loren Horsager: 00:57:38 They all service a little bit different markets. So they, they kind of have a size in mind and um, a lot of them want kind of proof, right? So it's like what, what is the definition of proof in this case that this is working? And then they want to know that, you know, you've gotten to x percentage of the market, how can they take it to the next percentage that they can grow this after they buy it? So having the, that kind of planned out of, you know, we don't need to hit a hundred percent of the market, we need to hit five percent and they're gonna take it to 20 percent. Right? So it's, it's, it's just the conversations of where are they at and what are they looking- how much are they looking to invest and what size do they want to get. Some, some, you know, say private equity groups want to spend $50,000,000 on average and someone who's been five, so you just need to be in the right place.
Loren Horsager: 00:58:22 And, and also the numbers are a little different in depending on what those are. Too, right? So a smaller market is probably going to be a smaller valuation, but there's a lot more opportunity for changing that through, um, how you structure it. So it's super easy for them. So a lot of those, a $5,000,000 buy can be a lot more complicated because it probably wasn't as well organized and didn't do a lot of things that are 50,000,000 company, 50,000,000 company has done, right? So it's all kind of their perspective of how they're approaching this. But we work with them to kind of identify what their needs specifically are and then we start to model what that goal, those goals should be. And we share those goals with them and say if we do this, is that what you'd like to see? And they'll come back and actually modify and say, here's what we'd like to see in this timeframe, this amount of market share, this valuation, this size, and that's what we shoot for then.
Ryan Tansom: 00:59:19 I love it. It's building a solution with the end in mind. Hundred percent. I know you gotta run here. As we've covered a lot of different things, is there one thing you want to highlight or one thing you want to leave our listeners with?
Loren Horsager: 00:59:31 I think the most critical thing is you got to get started. Like whatever you know, it might not be software. You need to figure it out. How to get yourself out of the business and how to actually get to build recurring revenue. And there's a lot... There are other ways to do that. This is the way we approach it, but I just need to start because I'm passionate about small businesses being able to actually create something and creating something beyond the business owner is I think really important. So. And some people don't care about that, but I think most people should because you're doing something that changes your family's life, your changing your community... It is just so important for people to think about the exit. And I think for a long time that wasn't really something that people have probably thought about much. It happened, but it wasn't necessarily the day-to-day goal of how to design your business. And I think that's becoming more of a thing, but people need to step up and actually make it part of their effort to figure out what they're going to do with it and how they're gonna approach it.
Ryan Tansom: 01:00:29 Well now because of technology and different people like yourself that are actually doing this stuff is actually possible now. It's not some big black box. So that's actually something that's practical and something that can actually implement. If our listeners are intrigued or they want to follow you or what's the best way to get in touch with you?
Loren Horsager: 01:00:45 Uh, probably via email is probably the best, which is ah, maybe you can post on the site. It's Loren l o r e n dot h o r s a g e [email protected]
Ryan Tansom: 01:00:59 I love it. Loren, thanks for coming on the show.
Loren Horsager: 01:01:02 Thank you, Ryan.
Ryan Tansom: 01:01:05 Thanks for sticking in there until the end of the episode. I hope you enjoyed the interview with Loren. We talked about a lot and some of it got into the weeds, but I hope you saw there were some really big takeaways. One that I think is extremely important is knowing your industry, your company, your competition, and the value of your business because then you can really calibrate and understand whether developing and getting into the software business is something that is worth the effort and is going to put you to the top of your game and in your industry because the value that you get on the outset and when the exit actually happens is going to be worth it if you approach it the right way. And we all know that competition is coming from every single angle and from people and companies and competitors that we didn't see before. So I think it's something that we just need to do is owners to stay in the game and stay competitive, but we should also know that there's a carrot at the end of the stick because the value and the return on investment and time and energy is for sure there.
And I think the big number two takeaway that I have is that this is not as daunting as it used to be. I've been a part of projects where we wrote 100,000 dollar check or $50,000 check and we got nothing. We had a bunch of headaches, we had a bunch of developers that had no idea what we're trying to do and why that this is a different mindset and a different project. Because we're creating value and we're not creating a cost center. It's not, it's not something that we are told to do by our IT manager or marketing manager. This is something that as owners or being creative or talking to our customers, we're solving problems and there were going back and we're implementing a solution that enables our current infrastructure to go to the next level.
And I think the third big takeaway in a practical piece of advice that I really enjoyed from Loren was that this is not something where you're just diving right into development. You can get into this, you can think, you can go through the creative process with minimal investment, minimal time, and at the worst outset of this is you're going to know your customers better, you're going to understand exactly where your company and your services play within the mindset of the customer. So I really hope you enjoyed the episode with Loren. I think the reoccurring revenue, the technology in the software world is really daunting and really confusing for a lot of people, but there's definitely some hope and there's a lot of practical ways that we can explore and implement it within our company. So I hope you enjoyed it. If you really liked it, go on itunes, give it a rating. Otherwise, I'll see you next week.